What is a Members’ Voluntary?

An Members Voluntary Liquidation (MVL) is the process whereby the existence of a solvent company is ended, its affairs wound up and its assets realised.

Process

The directors will instruct a Licensed Insolvency Practitioner to assist them in drafting the necessary documentation to place the company into MVL.

Board meeting: The directors hold a meeting of the board of directors, or pass written resolution:

• To convene a general meeting of shareholders to wind up the company;
• To appoint Liquidator(s);
• To nominate a director to prepare a Declaration of Solvency and
• To convene a members meeting or obtain written resolutions to place the company into liquidation.

Notices:Notices have to be issued to the members of the company enclosing resolutions to:

• Wind up the Company voluntarily;
• Appoint Liquidators and
• Grant the Liquidator(s) the power to distribute assets in specie to the members.

Declaration of Solvency:The nominated directors will prepare a Declaration of Solvency on behalf of the company confirming that the company will be able to pay its debts in full, including interest, within no more than 12 months of the commencement of the liquidation. 

Company meeting/Written Resolutions:Extraordinary or special resolution are passed to wind up the company. An ordinary resolution is also passed appointing an Insolvency Practitioners as Liquidator.  This can be the Licensed Insolvency Practitioner who assisted the directors in preparing the documents or a Licensed Insolvency Practitioner of the shareholders choice.

Effective Date

The effective date of the liquidation is the date of the shareholders meeting.

Effect of an MVL

The liquidator will realise the company’s assets, settle any creditor claims and distribute any surplus funds to the shareholders. Assets can be distributed in specie to shareholders thereby alleviating the need for them to be sold.

Duties of the Liquidator

The Liquidator will

• Realise the assets of the company;
• Liaise with HMRC to ensure that any tax liabilities have been paid in full;
• Agree creditors’ claims and, if any, make a distribution and
• Distribute any remain assets to the shareholders.

Conclusion of the MVL

Once all assets have been realised and distributions made to the shareholders the Liquidator will seek his release. Three months after the liquidation concludes the company is dissolved but details remain on Companies House Register for 20 years.

Advantages of an MVL

The advantages of an MVL include:

• An MVL allows the affairs of the company to be properly concluded and for the company to be removed from the register at Companies House;
• A company that is dissolved by Companies House can be reinstated up to 20 years after the date of dissolution.  The time limit for reinstating a company which has been wound up in an MVL is only six years and
• Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) may be available if you close your solvent company by an MVL. Doing so reduces the amount of Capital Gains Tax the shareholders have to pay.

Disadvantages of an MVL

There are disadvantages to an MVL.  These include but are not limited to:

• Takes longer than striking the company of the register;
• 8% interest must be paid on all outstanding HMRC debts.